Gift and Souvenir Stores NAICS 459420

Mar 11, 2025 - Supply Chain Uncertainty Amid Tariff Implementations

• Gift and souvenir stores, which rely heavily on goods imported from China, are preparing for the wide-ranging impacts of new Trump Administration trade policies. In March 2025, the US introduced an additional 10% tariff on Chinese imports and began 25% levies on Canada and Mexico (with exemptions). Anticipating the growing tariffs, US retailers began stockpiling goods before the costs went up, according to the latest Global Port Tracker report in Gifts & Decorative Accessories. According to Jonathan Gold, VP of Supply Chain and Customs Policy at the National Retail Federation, “Retailers have engaged in mitigation strategies to minimize the potential impact of tariffs, including frontloading of some products, but that can lead to increased challenges because of added warehousing and related costs.” Retailers also continue to diversify their supply chains to bypass tariff countries. “Unfortunately, it takes significant time to move supply chains,” Gold noted.
• According to a report in CFO Dive, consumer confidence and spending levels, indicators of gift spending, fell due to consumer concerns about tariff effects. Consumer spending was down 0.5% in January 2025, according to the Bureau of Economic Analysis, as consumers reduced purchases of vehicles and other durable goods. All five components of the consumer sentiment index from the University of Michigan dropped in February, including a nearly 20% decrease in buying conditions for durable goods. In addition, the Conference Board index of consumer sentiment in February 2025 marked the biggest decline since August 2021 and the third straight month of declines. According to Stephanie Guichard, senior economist for global indicators at the Conference Board, “There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current administration and its policies dominated the responses.”

• Party City has announced it filed for Chapter 11 bankruptcy protection in December 2024 and plans to close all of its nearly 700 locations, according to a report in Retail Dive. The company had previously filed for bankruptcy in January 2023 and emerged from bankruptcy later that year after shedding nearly $1 billion in debt. However, the company said in court documents that it emerged from bankruptcy into a challenging environment due to pressures from inflation, a reduction in discretionary spending, changing consumer preferences, and shrinking margins. Party City faced increased competition thanks to the growth of party products at Target and Amazon and the expansion of specialty stores like Spirit Halloween. Party City joined other high profile bankruptcies in 2024 including Spirit Airlines, Joann, and Tupperware. Corporate bankruptcies have reached their highest levels since 2010, with 686 companies filing for bankruptcy in 2024, per data from S&P Global Market Intelligence.
• Retailers are facing a nearly 30% increase in the rate of returns compared to last year, which could cut overall profit margins on the industry’s $1.2 trillion in global sales, according to Salesforce data reported in PYMNTS. Shoppers have already returned $122 billion in merchandise, per the report. According to Salesforce’s Consumer Insights Director Caila Schwartz, “Retailers had a robust holiday season, but a 28% rise in the rate of returns compared to last year is a cause for some concern.” AI tools are expected to be important in minimizing revenue losses on returns and reengaging with shoppers, per Schwartz. Returns volumes have increased in part due to the growth in online shopping and shopper practices such as “bracketing,” involving ordering multiple sizes or variations with the intention to return unwanted items, according to Hannah Bravo, head of Loop Returns. She said retailers are taking different approaches to managing returns such as offering longer return windows, charging fees related to item returns, and letting customers keep low-value items instead of returning them.